WIK-Consult • Final Report Study for the European Commission, Directorate General for Internal Market and Services The Role of Regulators in a More Competitive Postal Market Authors: Alex Kalevi Dieke James I. Campbell Jr. Nicole Angenendt Gernot Müller Associate contributors: Alexandre De Streel, CRID Robert Queck, CRID The views and opinions expressed in this study are those of the authors and do not necessarily reflect the position of the European Commission. Bad Honnef, September 2009 WIK-Consult GmbH Rhöndorfer Str. 68 53604 Bad Honnef Germany Role of Regulators in a More Competitive Postal Market I Contents Tables VII Figures X Case Histories XI Terms and Abbreviations XII Executive Summary i 1 Introduction 1 1.1 Purpose and outline of study 1 1.2 Acknowledgements 4 1.3 Overall methodology 5 1.4 Survey of national regulatory authorities, national competition authorities, and universal service providers 6 2 Overview of the Regulation of Postal Services 11 2.1 Evolution of the EU Postal Directive 12 2.2 Postal services and products in the EU/EEA market 14 2.3 Postal services ensured as universal services 18 2.4 Regulation of non-universal services 24 2.5 USPs, national USPs, and PPOs 26 3 Implementation of the Second Postal Directive 31 3.1 Regulatory framework 32 3.1.1 Postal laws and regulations 32 3.1.2 Postal authorities: Postal Ministries, USPs, NRAs, NCAs 35 3.1.3 Allocation of regulatory authority 39 3.1.4 Rights of ownership 45 3.2 National regulatory authorities 49 3.2.1 Establishment of NRAs 49 3.2.2 Mission and resources of NRAs 52 3.2.3 Independence of NRAs 63 3.2.4 Access to information and enforce orders 70 3.2.5 Enforcement authority 72 II Role of Regulators in a More Competitive Postal Market 3.2.6 Procedures, transparency, and appeals 74 3.3 Universal service obligation 78 3.3.1 Designation of universal service providers 78 3.3.2 Access facilities 79 3.3.3 Collection and delivery 81 3.3.4 Quality of service standards and monitoring at national level 83 3.3.5 Financing the net cost of the USO (if any) 88 3.4 Reserved area and special rights 90 3.4.1 Reserved area 90 3.4.2 VAT and postal services 93 3.4.3 Customs laws 96 3.4.4 International postal practices 99 3.4.5 Other special rights 105 3.5 Authorisation and licensing 106 3.5.1 Authorisations within the universal service area 106 3.5.2 Authorisations outside the universal service area 119 3.5.3 Authorisation procedures 122 3.5.4 Compensation fund 123 3.6 Regulation of the accounts of USPs 125 3.6.1 Separation of accounts 126 3.6.2 Allocation of costs generally 133 3.6.3 Allocation of delivery costs 137 3.6.4 Data quality 139 3.6.5 Verification and publication of regulatory accounts 140 3.6.6 Publication of audited financial accounts 142 3.7 Regulation of prices and terminal dues 143 3.7.1 Scope of price regulation 143 3.7.2 Cost-oriented, transparent, and affordable rates 146 3.7.3 Uniform rates 151 3.7.4 Methods of rate regulation 153 Role of Regulators in a More Competitive Postal Market III 3.7.5 Individual agreements and special tariffs 157 3.7.6 Rate investigations 164 3.7.7 Terminal dues and cross border mail 166 3.8 Protection of users 167 3.8.1 Establishment of user protection regulation 167 3.8.2 Remedies for users 171 3.8.3 Publication of user protection data 173 4 Application of Competition Law and State Aid Provisions in the Postal Sector 177 4.1 Application of antitrust to the postal sector 177 4.1.1 Cases decided by the European Commission 177 4.1.2 Cases by national competition authorities (NCAs) 188 4.1.3 Conclusions on the application of antitrust law 198 4.2 Application of state aid rules to the postal sector 201 4.2.1 Cases related to the Services of General Economic Interest 201 4.2.2 Cases related to the financial activities of the postal incumbents 208 4.2.3 Cases related to other issues 211 4.2.4 Conclusions on the application of state aid law 215 5 Preparations for the Third Postal Directive 217 5.1 Transposition of the Third Postal Directive 218 5.2 Ensuring universal service 219 5.2.1 Three options for ensuring universal service 219 5.2.2 Designation of USP(s) 225 5.2.3 Public procurement 228 5.3 Phasing out the reserved area and other special rights 231 5.3.1 Reserved area 231 5.3.2 Other special rights 232 5.4 Regulations for a multi-operator market 235 5.4.1 Access to postal infrastructure 235 5.4.2 Interoperability and the multi-operator environment 238 5.5 Revised relationship between postal and competition regulation 241 IV Role of Regulators in a More Competitive Postal Market 5.5.1 Consultation and coordination between NRA and NCA 242 5.5.2 Model for relations between postal and competition regulation 248 5.6 Definition of the universal service obligation 251 5.6.1 Demand for universal postal service in the future 252 5.6.2 Effects of uniform rate requirements 253 5.6.3 Elements of universal service and/or groups at risk (if any) 256 5.6.4 Evaluation of net cost of universal service (if any) 259 6 Best Regulatory Practices 263 6.1 Definition of 'best practice' 264 6.1.1 Compliance with the Third Postal Directive 264 6.1.2 Other factors relevant to best practice 265 6.2 Establishment and operation of postal NRAs 267 6.2.1 Allocation of regulatory authority 267 6.2.2 Independence of NRA 271 6.2.3 Resources of the NRA 272 6.2.4 NRA authority to gather information and enforce its orders 274 6.2.5 Procedures of the NRA 275 6.2.6 Public consultation by the NRA 276 6.2.7 Consultation between NRA and NCA 277 6.3 Striking a balance between the universal service obligation and full market opening 278 6.3.1 Range of services within the USO 278 6.3.2 Uniform rate requirements 281 6.3.3 Reliance on market forces to ensure universal service where feasible 283 6.3.4 Designation and public procurement to ensure universal service 285 6.3.5 Separation of designation and authorisation procedures 287 6.3.6 Authorisations for services within the universal service area 289 6.3.7 Conditions on authorisations 291 6.3.8 Scope of regulated accounts 293 6.3.9 Allocation of costs according to Article 14 296 6.3.10 Verification and transparency of accounting regulation 300 Role of Regulators in a More Competitive Postal Market V 6.4 Ensuring the universal service 301 6.4.1 Standards for access, affordability, and quality of service 301 6.4.2 Exceptions to the delivery frequency and quality of service of universal services 302 6.4.3 Price control of universal services provided by market dominant postal service providers 304 6.4.4 Delivery of inbound cross border postal items 307 6.4.5 Financing of the net cost of universal service (if any) 309 6.5 Ensuring full market opening for postal services 311 6.5.1 Phasing out of the reserved area 311 6.5.2 Planning for application of competition rules to protect full market opening 312 6.5.3 Access to national postal infrastructure 313 6.5.4 Access to elements of the international postal infrastructure 314 6.5.5 Valued-added tax 315 6.5.6 Customs laws 317 6.5.7 Facilitation of multi-operator environment 318 6.5.8 Review of application of laws generally for barriers to entry and market distortions 319 6.6 Protecting the rights of users 321 6.6.1 Transparency of prices and quality of service of universal services 321 6.6.2 Handling of user complaints 322 7 Cooperation Among NRAs 325 7.1 Current status of administrative cooperation in the postal sector 326 7.1.1 Postal Directive committee 327 7.1.2 CERP 328 7.2 Practice in other EU sectors 333 7.2.1 Competition authorities 333 7.2.2 Electronic communications 336 7.2.3 Energy 342 7.2.4 Railways 349 7.2.5 Conclusions from cooperation in other sectors 350 VI Role of Regulators in a More Competitive Postal Market 7.3 Recommendations for enhanced cooperation 353 7.3.1 The need for enhanced cooperation 353 7.3.2 Areas for cooperation among NRAs 356 7.3.3 An advisory group of postal regulators 360 8 Conclusions and Recommendations 363 8.1 Key regulatory tasks 364 8.2 Key institutional reforms 366 8.3 Evolution of the role of regulators in perspective 371 Role of Regulators in a More Competitive Postal Market VII Tables Table 1-1 Question modules for Internet survey 7 Table 1-2 Response rates by ministries and NRAs by question module (part 1) 8 Table 1-3 Response rates by ministries and NRAs by question module (part 2) 9 Table 1-4 Number of responses by NCAs, question module 401 9 Table 1-5 Number of responses by USPs, by question module 10 Table 2-1 Weighting of Member States in EU/EEA postal market 16 Table 2-2 Overview: services required by Postal Directive (as interpreted by NRAs) 19 Table 2-3 Overview: services ensured as universal services 20 Table 2-4 Overview: services ensured as universal services (USPs) 22 Table 3-1 Primary postal legislation 33 Table 3-2 Secondary postal legislation: dates of major measures 34 Table 3-3 Ministry with primary responsibility for postal services 36 Table 3-4 National universal service provider 37 Table 3-5 National competition authority and its role in postal sector 38 Table 3-6 Authority determining policy decisions required by Postal Directive 41 Table 3-7 Responsibility for administrative decisions required by Directive 43 Table 3-8 Government control of the public postal operator 45 Table 3-9 Primary national regulatory authority for postal services 50 Table 3-10 Resources of NRAs (2008) 52 Table 3-11 Average resources of NRAs by MS group (available data only) 56 Table 3-12 Organisation of the NRA 64 Table 3-13 Government supervision of NRA 66 Table 3-14 NRA authority to gather information 70 Table 3-15 Enforcement